While not the booming performance experienced in 2024, analysts do expect modest growth in both the equity and bond markets in 2025.

Here are a few trends we’re watching this year:

1. Economic Conditions: Lower interest rates, moderate inflation, and modest but positive economic growth are expected to create a favourable environment for investments this year.
2. Private Credit: The demand for private credit is expected to grow, fueled by investors seeking higher returns in a low-interest-rate environment. This will make corporate bonds and other investments in corporate credit an opportunity this year.
3. Artificial Intelligence (AI) and Infrastructure: Companies will need to raise capital to invest in AI technologies and the necessary energy infrastructure, so investment in AI may pay off. It won’t be cheap though.
4. Risk Appetite: Investors are expected to remain pro-risk, with a particular focus on U.S. stocks due to corporate strength in the U.S. market.

Caution Ahead: There is, however, a need for nimbleness in your portfolio, to adapt to potential market volatility from a variety of sources including tariffs, political unrest, elections, and currency valuations, for example.

Buying Canadian

The Canadian equity market is expected to build on the strong performance seen in 2024.

1. Positive Performance: Canadian equities are still anticipated to continue their upward trend, this year.
2. Sector Recommendations: Sectors like Consumer Discretionary, Financials, REITs, and Technology are favoured for their growth and income potential this year.
3. Valuation: The Canadian stock market is currently at a valuation discount compared to the U.S., where key market movers are over-priced. This means opportunity for gains by investing in Canadian companies.

The Bond market in Canada is also looking promising, with several factors contributing to a favourable environment:

1. Attractive Yields: Canadian bonds are expected to offer attractive yields, especially as the Bank of Canada continues its rate-cutting cycle. The dreaded U.S. tariffs may result in the Bank of Canada accelerating its rate cuts this year, which is good news for bond holders.
2. Political Uncertainty: While political changes could introduce some uncertainty, the overall impact on the bond market is expected to be minimal. Holding bonds in your portfolio may provide you some stability this year.

Sectors to Watch

Here are some key sectors to consider investing in for your Canadian investment holdings:

1. Information Technology: Poised for significant growth and driven by advancements in artificial intelligence and machine learning, Canadian companies like Celestica and Coveo Solutions are leading the way.
2. Financials: The financial sector remains strong, with banks like Toronto-Dominion Bank and asset management firms like CI Financial showing robust performance and growth potential.
3. Clean Energy: Investments in clean energy sources such as solar and wind, as well as energy storage technologies, are expected to rise.
4. Healthcare Technology: Innovations in healthcare, including telemedicine and biotechnology are driving growth in this sector.
5. Consumer Discretionary: This sector is expected to benefit from increased consumer spending and economic recovery.

The preceding is not investment advice and we recommend meeting with your investment advisor to discuss your individual risk level and where the opportunities and risks are for your investments in the coming year.

One Final Tip: Think ‘Mid-Cap’ for value and performance

If you’re looking for a long-term return that isn’t tied to the expensive S&P 500 index (where giants like Tesla, Apple, Google, Nvidia, etc., make up over 50% of returns), Mid-cap stocks or mid-cap funds are reasonably valued in absolute terms and are very attractive compared to large caps (S&P 500).

These stocks proved their resilience when the speculative bubble burst in 2000, outperforming for a dozen years. Over the long term, mid-cap stocks also tend to perform well. So, if steady performance is your goal, mid-cap might be worth considering.

Should you need an honest second opinion or are shopping for a new investment advisor who will attentively guide your financial success, Plan for Wealth Ltd. is happy to assist you.

Written by Plan for Wealth Ltd.  ‘we plan. you prosper.’